The 60% Tax Trap: What It Is and How to Avoid It

If your income goes above £100,000, you enter a band where every extra pound costs you 60p in income tax. Not 40p. Sixty. Here is why it happens and what you can do about it.

Last updated: 17 May 2026

How the trap works

UK income tax gives every taxpayer a Personal Allowance: £12,570 of income you pay no tax on in 2026/27. It is the first slice of your earnings, and it is tax-free.

Above £100,000, HMRC starts withdrawing it. For every £2 of income over £100,000, £1 of allowance disappears. By the time your income reaches £125,140, the allowance is gone entirely.

The effect is that you pay tax twice on the same slice of income: the standard 40% higher rate on the income you earned, plus 40% on the allowance you just lost. The combined rate on each extra pound in this band comes to 60%.

The maths, per £2 earned above £100,000

Income tax at 40% on the £2 you earned 80p

Personal Allowance lost: £1, taxed at 40% 40p

Total tax on the £2 £1.20 = 60%

National Insurance adds another 2% (the upper rate above £50,270), pushing the combined effective rate to 62%. The "60% trap" name refers to income tax only, but the full picture is slightly higher.

The trap in numbers

The table below shows how income tax changes across three salary points. All figures use 2026/27 rates for a standard rUK employee with no other income.

	£99,000	£110,000	£126,000
Personal Allowance remaining	£12,570	£7,570	£0
Income tax (approx.)	£31,032	£33,432	£37,668
Extra income vs £99k	—	+£11,000	+£27,000
Extra tax vs £99k	—	+£2,400	+£6,636
Effective marginal rate in band	40%	60%	45%

Approximate 2026/27 income tax only. Figures assume rUK rates, standard employee, no other income, no pension deductions. Use the calculator below for your exact figure.

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100k Salary Trap Calculator

Enter your salary and pension contributions. See your effective marginal rate and exactly how much pension sacrifice would bring you out of the trap.

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Scotland: the rate is 67.5%

Scottish taxpayers pay the advanced rate of 45% on income between £75,001 and £125,140. The Personal Allowance taper zone (£100,000 to £125,140) sits entirely inside that band.

Apply the same mechanism at 45% instead of 40%:

Scotland — per £2 earned above £100,000

Income tax at 45% on the £2 you earned 90p

Personal Allowance lost: £1, taxed at 45% 45p

Total tax on the £2 £1.35 = 67.5%

A Scottish earner on £110,000 is in a worse position than the headline 60% figure suggests. The Scottish income tax calculator shows the full breakdown including the exact allowance remaining at any salary.

How to avoid it: salary sacrifice

The mechanism that creates the trap also creates the solution. HMRC assesses the Personal Allowance taper against your adjusted net income (ANI): your gross earnings minus personal pension contributions and Gift Aid donations. Reduce your ANI below £100,000 and your full Personal Allowance is restored.

Salary sacrifice is the most efficient route. Your employer reduces your gross salary and pays the difference directly into your pension. Because the contribution comes out before income tax and National Insurance are calculated, you save on both.

Worked example: £110,000 salary

	No sacrifice	£10k sacrifice
Adjusted net income	£110,000	£100,000
Personal Allowance	£7,570	£12,570
Income tax (approx.)	£33,432	£27,432
Tax saving	—	£6,000
Net cost of £10k contribution	—	£4,000

A £10,000 pension contribution costs £4,000 net because the 60% effective relief applies to each pound sacrificed in the trap zone. You receive £12,570 of Personal Allowance back and pay 40% on £5,000 less taxable income — a combined saving of £6,000.

To set this up, speak to your employer's HR or payroll team. Not every employer offers salary sacrifice; if yours doesn't, contributions to a personal pension (SIPP) still reduce your ANI and attract 40% tax relief — you claim the extra relief above basic rate through your Self Assessment return.

The pension annual allowance for 2026/27 is £60,000 (employer and employee contributions combined). Earners above £260,000 face a tapered annual allowance. Neither limit is likely to bind for someone contributing just enough to escape the £100k trap, but worth checking if your employer also makes large contributions.

Other strategies

Gift Aid donations

Charitable donations made through Gift Aid also reduce your adjusted net income. A £1,000 Gift Aid donation reduces ANI by £1,000 (not by the grossed-up amount — that distinction matters). Useful if you give regularly to charity and are already close to the £100,000 boundary.

Asking about bonus direction

If a bonus would push you into the trap, ask your employer before it is paid whether it can go directly to your pension. Many employers can arrange this. Once the bonus is paid as cash, the tax is already calculated and you lose the opportunity to route it as a pension contribution pre-PAYE.

Timing income (self-employed and directors)

If you control when income is recognised — through a limited company, for instance — there is sometimes scope to spread income across tax years to stay below £100,000 in each. This is a planning question specific to your structure, not a general rule. An accountant who works with owner-managed businesses is the right person to ask.

What if you can't avoid it?

Not everyone can or wants to maximise pension contributions. If you need the cash now — for a mortgage, a house purchase, or other immediate costs — deliberately taking the tax hit is a rational choice.

A few practical points if you are in the trap and not sacrificing your way out:

Check your tax code. HMRC sometimes adjusts your PAYE tax code to collect the extra tax through your salary. If your code looks wrong, call HMRC or use your personal tax account to check the calculation behind it.
File a Self Assessment return. If you earn over £100,000 and don't already do this, you're required to. It is also the mechanism through which you claim any extra pension tax relief not collected through payroll.
Even partial sacrifice helps. Bringing ANI from £110,000 to £105,000 still restores £2,500 of Personal Allowance and saves £1,000 in income tax. Perfect is the enemy of good here.

Use the 100k salary trap calculator to see your effective rate at any income level and find the pension contribution that brings your ANI to exactly £100,000.

Frequently asked questions

What is the 60% tax trap?

When your income exceeds £100,000, your Personal Allowance (£12,570 for 2026/27) is reduced by £1 for every £2 you earn above that. The combined effect — 40% tax on the income itself plus 40% tax on the allowance you lose — creates a 60% effective marginal rate on every pound earned between £100,000 and £125,140.

Why is the rate 67.5% in Scotland?

Scottish taxpayers pay the advanced rate of 45% on income between £75,001 and £125,140, which covers the entire Personal Allowance taper zone. The same PA withdrawal mechanism applies, but at 45% the combined rate is 67.5% rather than 60%.

How does salary sacrifice reduce my tax in the trap zone?

Salary sacrifice reduces your adjusted net income before HMRC assesses the Personal Allowance taper. Contribute enough to bring your adjusted income to £100,000 or below and your full Personal Allowance is restored. Every £1 of sacrifice in the taper zone saves you 60p in income tax, making pension contributions unusually efficient in this band.

Does the trap apply to bonuses and other income?

Yes. HMRC adds all income together: salary, bonuses, rental income, self-employment profit, and some benefits in kind. If a bonus pushes you above £100,000, the taper applies to that portion. Ask your employer whether bonuses can be directed into your pension before they are paid.

What is the pension annual allowance?

For 2026/27, you can contribute up to £60,000 per year to your pension (employer and employee contributions combined) and receive tax relief. Earners above £260,000 may face a tapered annual allowance that reduces this limit. Contributions above the annual allowance attract a tax charge.